Derek Hewett • Bank of America

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CFO & COO Elizabeth Murray expressed confidence in covering the $0.26 regular dividend based on the current SOFR curve. Co-Portfolio Manager Bryan High described the current credit backdrop as constructive but noted forecasting two years out is difficult. President Matthew Freund stated that amendment activity was lower than average in Q2, pointing to the shrinking pool of criticized assets as a positive indicator.

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Co-CEO Alex Chi explained that loan repricing has largely subsided and noted that new investment spreads widened. Co-CEO David Miller added that the yield decline was also driven by the exit of high-coupon non-accrual loans. Regarding tariffs, Chi clarified the exposure analysis was prospective, based on supply chain risk, and no performance impact has been observed yet, so fair values were not adjusted on that basis. Miller noted more clarity on tariffs emerged after the quarter ended.

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An executive confirmed the incentive fee is being reduced from 20% to 17.5% while retaining the shareholder-friendly lookback provision. They explained that due to this lookback feature and potential future gains or losses, the actual fee earned will naturally fluctuate over time and is subject to the cap.

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Co-Chief Executive Officer Alex Chi stated the approximate 1% increase in risk-rated 3 and 4 assets was driven by one underperforming company being downgraded. Co-Chief Executive Officer David Miller identified the company's sector as business services, with Alex Chi clarifying it was not in the ARR or healthcare sectors.

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CFO Amit Joshi stated that BCSF expects the incentive fee to stabilize from the second quarter of 2025 onwards. He noted that while the significant impact from the COVID period has been accounted for, the payment component of the look-back feature could still introduce some future volatility.

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CFO Amit Joshi stated that the company is in continuous dialogue with its banking partners and intends to access the capital markets in 2025 to refinance the debt. He mentioned that they would prudently manage the liability using a combination of their revolving credit facility and potentially new unsecured notes.

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Co-CEO Douglas Goodwillie clarified that the leverage target forecast is based on the current strong investment pace and does not include the BSL portfolio rotation. Regarding risk, Mr. Goodwillie and Senior Vice President Frank Karl addressed the questions. Mr. Goodwillie noted minimal direct exposure to government funding risk but acknowledged monitoring secondary effects, such as in healthcare. Mr. Karl explained that while about a quarter of the portfolio has some import exposure from China, most borrowers have pricing flexibility to mitigate tariff impacts.

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CFO and Treasurer Terry Hart stated that while they have a KBRA rating and can approach a larger agency, the immediate strategy would likely be another private placement. He explained the plan is to 'leg into' the institutional market by first increasing their outstanding notes closer to the $300 million threshold needed for a larger public deal, which they would then pursue upon maturity of the smaller placements.

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CEO Justin Plouffe specified that the incremental dividend from the joint venture was approximately $1.2 million. He added that this had a net impact on Net Investment Income (NII) of about $0.02 per share for the quarter.

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Executive Shaul Vichness stated that the upper middle market portfolio is approximately $200 million, or about 10% of the total portfolio. He explained that the yield premium for traditional middle market loans versus BSL/upper middle market is at the wider end of its historical 100-200 basis point range. He noted current spreads are around 500 basis points for core middle market deals, compared to the low 300s for BSL and upper middle market assets.

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CEO Christopher Long stated that the impact of the September rate cut on Q3 results was 'de minimis' due to the timing. He noted that much of the repricing activity is already baked into current market spreads, which have stabilized. President Matt Bloomfield addressed the second question, explaining that the short-term investments balance has reached a 'more normalized range' after being used to fund commitments, including approximately $15 million in private credit deals set to close in Q4.

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CEO Robert Kipp DeVeer explained that most of ARCC's PIK income is structured into deals by choice, particularly in junior capital investments, and is not a sign of portfolio stress. Co-President Kort Schnabel added that 90% of PIK was structured at origination. For blind spots, DeVeer emphasized that a lack of diversification is a key risk, highlighting ARCC's highly diversified portfolio as a major strength.

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President Henry Chung explained the 71% covenant figure is a function of market segmentation, as deals at the upper end of their 'core middle market' definition may be covenant-lite. CEO Jason Breaux added that these deals still have strong documentation and protections. Henry Chung also clarified that the majority of PIK income was from terms available at origination, primarily in second lien or unsecured investments, rather than from amendments.

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